Are life insurers sitting on payable policies?

States investigating how life insurance companies pay claims.

March 24, 2012|Paul Muschick | The Watchdog

If you have life insurance, make sure your beneficiaries know who they are and where they can find your policy after you're gone.

If you don't give them the information, that policy isn't going to do anybody any good. Officials in several states, including Pennsylvania, say that happens too frequently, resulting in payable claims not being filed.

To combat that, officials are pressuring insurance companies to do more on their own to look for deceased policyholders and pay their beneficiaries, even if a claim isn't filed. If beneficiaries can't be found, the states say the money should be turned over to their unclaimed property bureaus or treasuries.

The Pennsylvania Unclaimed Property Bureau, Pennsylvania Insurance Department and their counterparts in other states recently reached agreements with Prudential insurance to address the issue. Prudential Financial told me it has been trying to identify payable policies and that the additional steps called for in the settlements will enhance those efforts.

A January agreement between Prudential and unclaimed property bureaus and treasury departments in more than 30 states says an auditor identified "what it considers to be proceeds that are required to be reported and remitted" to states. Prudential doesn't agree that all of those proceeds are owed.

Officials say insurance companies have the ability to look for payable policies and some just aren't doing it.

"We know that the failure to search for beneficiaries even though the company has access to death information is a pervasive industry practice," Florida Insurance Commissioner Kevin McCarty said in a statement.

"It's almost morally indefensible is what this comes down to," Jack Stollsteimer, director of Pennsylvania's Unclaimed Property Bureau, told me. "If they were purposely sitting on these benefits and they could have easily found these people, it's hard to argue."

The Pennsylvania Insurance Department was among more than 20 state insurance departments that reached a separate agreement with Prudential last month.

The department told me insurers aren't legally obligated to search for policyholders who have died and then hunt for beneficiaries. That doesn't mean, though, that they can ignore their obligations when deaths are known, spokeswoman Rosanne Placey said.

"Insurers are required to attempt in good faith to effectuate prompt, fair and equitable settlements of claims in which the insurer's liability under the policy has become reasonably clear," Placey said in an email. "They must also implement reasonable standards for the prompt investigation of claims."

The agreements with Prudential require it to take steps to identify policies of deceased people. Prudential said it has been doing that by cross-checking its policyholder data against Social Security death records.

The agreements call for those checks to be done more frequently and thoroughly.

Instead of looking only for exact matches, searches also will look for "fuzzy" matches where letters in a name or digits in a birth date or Social Security number might be transposed. Prudential must use a variety of investigative tools, including online database searches, to identify potential beneficiaries and try to contact them.

It's unclear how much money might be owed to beneficiaries of Prudential policyholders in Pennsylvania, or the state Unclaimed Property Bureau if beneficiaries cannot be located, state officials said.

Last year, a similar agreement with John Hancock insurance resulted in $8 million being paid to the Pennsylvania Unclaimed Property Bureau, Stollsteimer said. More than $325,000 of that money has been returned to rightful heirs through the claims process.

The Pennsylvania departments were among the lead agencies on the settlements with Prudential.

"One of the top consumer questions we receive at the Insurance Department is how to determine if a deceased loved one had life insurance," state Insurance Commissioner Michael Consedine said in a statement. "Since there is no data bank of this sort of information, it is necessary that the companies do as much as they can to find beneficiaries."

The department told me settlements may be reached with other insurance companies, too.

More information on this evolving topic is on my blog at http://blogs.mcall.com/watchdog/.

If you think a loved one was insured but you couldn't find the policy information and didn't file a claim, check with the unclaimed property bureau for any proceeds at http://www.patreasury.gov/unclaimedproperty.html.

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